Korea to cut corporate taxes, redress industrial accident law
Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho, third from left, speaks during a joint government briefing on the Yook Suk-yeol government's first economic policy direction at the Government Complex Seoul, Thursday. From left are Minister of SMEs and Startups Lee Young, Minister of Employment and Labor Lee Jeong-sik, Choo, and Minister of Land, Infrastructure and Transport Won Hee-ryong. Yonhap
Growth forecast cut to 2.6 percent, inflation projection raised to 4.7 percent
By Yi Whan-woo
The government will cut the maximum income tax rate for businesses to 22 percent from 25 percent in a bid to facilitate corporate investments and create more jobs, while easing the property tax burden on homeowners.
Beginning in July, the government will also work on the shortcomings of the so-called Serious Accidents Punishment Act and amend it if necessary.
Effective from January, the law is aimed at preventing poor safety management and recurring fatal accidents at work. However, it was protested by businesses for bolstering criminal punishment for negligent CEOs.
Announced by the Ministry of Economy and Finance and relevant ministries, Thursday, these measures are part of the Yoon Suk-yeol administration's first economic policy objectives.
The roadmap contains Yoon's market-driven economic vision that puts the private sector at the core of its path for economic recovery, and accordingly, seeks bold regulatory reforms to nurture business innovation.
“We will break through the economic crisis through a bold shift in the government-led economic paradigm,” Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho said during a joint press briefing with other ministers at the Government Complex Seoul.
He vowed to “mobilize all possible policy tools” to stabilize the economy and consumer prices, adding, “We ask for support from the corporations, labor circle and politicians as well as citizens as the government can't do it alone.”
To better implement deregulation, Choo will lead a special task force to be set up within this month, joined by other economy-related ministers.
The directives apparently ask for prudence in introducing new regulations, as they will be only allowed at the expense of scrapping or easing existing rules.
The inheritance of businesses among family members will become smoother, by extending the deadline for taxes payments once the inheriting party fulfills conditions as required.
The annual sales of companies subject to inheritance taxes will be raised from 400 billion won to 1 trillion won ($776.2 million).
In the finance sector, the levying of capital gains taxes on stocks and other financial products will be delayed for two years, reversing the previous Moon Jae-in government's plan to impose such taxes this year.
The 52-hour cap on the workweek will be revised for more businesses to flexibly manage their workforce while protecting employee rights.
While the economic directives mainly deal with long-term policies, they will also cover pressing issues.
One of the most urgent issues is taming red-hot home prices.
The government will specify plans to build more than 250,000 homes and lower property taxes for single home owners. They will be levied taxes at levels similar to 2020, a year before the steep rise in housing prices began.
The so-called loan-to-value (LTV) ratio, which is a number lenders use to determine the risk of extending loans, will be raised to 80 percent, to allow more would-be home owners to borrow money.
To spur business innovation, incentives will be given for investments and job creation involving technologies that are linked to national interests, such as microchips, batteries and OLED displays.
Government-led support will increase to develop infrastructure for next-growth engines, ranging from artificial intelligence to biotechnology, mobility, aerospace technology and robots.
In accordance with Korea's return to a nuclear energy policy, the government will help export 10 nuclear reactors by 2030 and intensively work on developing technologies for small modular reactors (SMRs) and the production of hydrogen energy using nuclear reactors.
With tax exemptions and other benefits, the reshoring of companies will be encouraged amid concerns over disrupted supply chains worldwide.
For the financial industry, the government will push to institutionalize the digital asset market in consultation with experts, while lowering barriers and facilitating fair competition between banks and big tech firms in digital banking.
The reform of public firms and national pension service will be carried out amid concerns over lax management of state-run companies and a rapidly-aging population that will deplete retirement funds faster than expected.
Gloomy outlook
The finance ministry cut its 2022 growth forecast for Korea to 2.6 percent from 3.1 percent, while upping the inflation outlook from 2.2 percent to 4.7 percent.
The revision is in line with other gloomy outlooks on Asia's fourth-largest economy amid the looming fear of stagflation ― a toxic mixture of stagnant growth and rising inflation accompanied by high unemployment.
The ministry assessed that private spending will bounce back quickly following eased social distancing rules that have been in effect since April, rising 3.7 percent by the end of this year.
But global economic uncertainties, noticeably the ongoing war in Ukraine, economic slowdown in both the United States and China and bottlenecked supply chains, are making Korea's road to recovery tough, the ministry said.
Imports are projected to increase 18 percent, while exports rise only 11 percent, amid soaring prices of energy and commodities.